8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 17, 2006

First Defiance Financial Corp.

(Exact name of registrant as specified in its charter)

Ohio	0-26850	34-1803915
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

601 Clinton Street, Defiance, Ohio	43512
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (419) 782-5015

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4© under the Exchange Act (17-CFR 240.13e-4(c))

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On April 17, 2006 First Defiance Financial Corp. issued a press release announcing results for the 2006 first quarter period ended March 31, 2006. A copy of the press release is attached hereto as Exhibit 99.1.

The information in this Form 8-K and the attached Exhibit shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements of businesses acquired. Not Applicable

(b) Pro forma financial information. Not Applicable

(c) Exhibits

99.1 Press Release, dated April 17, 2006

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.

First Defiance Financial Corp.
By:	/s/    John C. Wahl
	John C. Wahl Executive Vice President/ Chief Financial Officer

Date: April 18, 2006

EX-99.1

Exhibit 99.1

  NEWS RELEASE Contact:   William J. Small                    Chairman, President and CEO                    (419) 782-5015                    bsmall@first-fed.com

For Immediate Release

FIRST DEFIANCE ANNOUNCES 2006

FIRST QUARTER EARNINGS

DEFIANCE, OHIO (April 17, 2006) - First Defiance Financial Corp. (NASDAQ: FDEF) today announced that net income for its first fiscal quarter ended March 31, 2006 totaled $3.85 million, or $0.54 per diluted share, compared to $2.87 million or $0.41 for the first quarter ended March 31, 2005, which represents an increase of 31.7% on a per share basis. Excluding $884,000 of charges recorded in the 2005 first quarter related to the acquisition of ComBanc, Inc. ($575,000, or $0.09 per share after tax), first quarter 2005 core operating earnings were $3.4 million or $0.50 per share. On a core earnings basis, the 2006 amount represents an increase of $406,000, or $0.04 per share or an 8% increase, over the first quarter 2005 excluding the acquisition charges.

“The real driver of our success this quarter was a significant increase in our fee income, particularly deposit fees, and that growth was critical in offsetting increasing pressure to our net interest margin,” commented William J. Small, First Defiance’s Chairman, President and Chief Executive Officer. The first quarter is also the period when we recognize contingent income earned by First Insurance and Investments and that amount was at a record level for us this year.”

Net Interest Income Increased by 16%

Net interest income for the quarter ended March 31, 2006 was $12.3 million compared to $10.6 million, an increase of 16%. Most of the increase is due to the growth in the balance sheet resulting from the April 2005 acquisition of The Genoa Savings and Loan Company as well as a full quarter of income from the ComBanc acquisition which was completed in late January 2005. Interest income increased to $21.7 million for the 2006 quarter compared to $16.4 million in the 2005 first quarter. The growth was entirely attributable to the loan portfolio, where the average balance increased to $1.18 billion in the 2006 first quarter from $982 million in the first three months of 2005. Average loan yields increased to 6.91% from 6.10%. Interest income gains were offset by increases in interest expense, which grew to $9.4 million from $5.8 million. That increase was primarily in interest-bearing deposits, where the average balance increased to $973.7 million from $846.8 million in the year earlier period. The average cost of those deposits increased to 2.84% from 1.89%. Also, First Defiance issued $20 million in trust preferred subordinated debentures in the 2005 fourth quarter at a cost of 90-day LIBOR plus 1.38%. The cost of the subordinated debentures was 5.92% in the 2006 first quarter.

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Net interest margin for the quarter ended March 31, 2006 was 3.84%, a slight increase over the 2005 first quarter margin of 3.83%. The primary reason for the period over period increase was the issuance of additional equity as part of the ComBanc acquisition. First Defiance’s average yield on interest earning assets increased to 6.73% for the 2006 first quarter, up from 5.90% for the same period of 2005, an increase of 83 basis points. However, during that same period, the cost of interest-bearing liabilities increased to 3.18% for the 2006 quarterly period, up from 2.31% in 2005, an increase of 87 basis points. As a result, the Company’s interest rate spread has compressed to 3.55% in 2006 compared to 3.59% in 2005. More significantly, the net interest margin declined from 3.92% in the 2005 fourth quarter, due primarily to funding costs increasing by more than asset yields during those periods.

“Margin pressure caused by the flat yield curve is by far the biggest challenge we face, not just at First Defiance but throughout our industry,” said Mr. Small. “Loan growth remains strong in our markets. The biggest obstacle in meeting our earnings goals for the year will be our ability to fund that growth in a cost-effective manner. We have focused significant management resources on growing deposits, especially lower-cost core deposits, but competition for those accounts is intense. Also, customers who have been content to park funds in money market accounts in the low interest rate environment of the last several years are now moving to higher-yielding certificates of deposits as those rates have climbed. While we will continue to manage these accounts in the most effective way possible, we anticipate that our deposit costs will be under pressure for the rest of this year.”

Asset Quality Still Strong

Non-performing assets increased to $7.6 million at March 31, 2006 from $5.4 million at December 31, 2005. The increase was primarily attributable to taking deeds in lieu of foreclosure from a large commercial real estate credit, which increased real estate owned from $404,000 at the end of 2005 to $3.7 million at March 31, 2006. Management has interested buyers and is negotiating sales agreements for a majority of the properties added to REO and does not anticipate any further loss on any of those assets. Non-accrual loans, which are loans contractually past due 90 days, declined to $3.9 million at March 31, 2006 from $5.0 million at December 31, 2005.

“Our non-performing asset ratios have deteriorated some since last quarter but overall our credit quality has actually improved,” said Mr. Small. “Assets classified as substandard or doubtful have declined to $44.4 million at March 31, 2006 from $52.1 million at the end of 2005 and our net charge-offs were just $208,000 or .07% of average outstanding loans (annualized) in the 2006 first quarter compared to $329,000 in last year’s fourth quarter. Our collection efforts continue to be significant with the loan portfolios we acquired with the ComBanc and Genoa acquisitions and those efforts will continue throughout the year. Over time, I expect that we’ll see improvement in all of our asset quality measures. The one relationship that caused the blip in our non-performing assets this quarter was a borrower that owned a number of rental properties and apartments, all of which we believe we’ll be able to sell without any significant additional loss.”

First Defiance’s provision for loan losses for the 2006 first quarter was $383,000 compared to $347,000 in the 2005 first quarter.

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Fee Income Key to Improvement

Total non-interest income increased to $4.5 million in the 2006 first quarter, compared with $4.3 million in the same period in 2005. The 2005 amount included gains from sale of investment securities of $621,000 and there were no securities gains in the 2006 first quarter. Excluding those securities gains, non-interest income increased by $875,000 or 24%.

The increase in non-interest income occurred in primarily two areas: deposit fees and insurance commission income. Service fees and other charges increased by $590,000 or 49% in the 2006 first quarter compared to the same period in 2005. The increase was due both to the growth in balances resulting from the 2005 acquisitions and the first quarter 2006 implementation of an overdraft privilege product. Management estimates that the overdraft privilege product will increase total fee income for the year by more than $1.0 million. In the quarter ended March 31, 2006, checking account fees increased by $399,000 over the same period in 2005 and by $145,000 over the 2005 fourth quarter. The overdraft privilege product was not fully implemented until early in March 2006.

Insurance commission income increased to $1.66 million in the 2006 first quarter, up from $1.21 million during the first quarter of 2005. Current period results include a record $539,000 of contingent income that property and casualty insurance companies pay to their agencies based primarily on positive growth trends and favorable claims experience. By comparison, contingent income in the 2005 first quarter was $356,000.

“With margins getting squeezed, growth in non-interest income is absolutely critical to our success,” said Mr. Small. “We are encouraged by the fee income opportunities we have created with our new overdraft privilege product which provides a service that our customers appreciate. We are also pleased with the growth we’re seeing at First Insurance and Investments. While the contingent commission gave us a considerable boost in the first quarter, the fact that our commission income excluding the contingencies is up by over $260,000 from 2005 to 2006, an increase of 30.8%, represents good progress and gives us reason to expect continuing improvement in 2006. Most of the increase was in commission from the sale of investment products, which was just $49,000 in the first quarter of last year compared to $256,000 in this year’s first three months.”

Non-Interest Expenses Up Due to Growth

Non-interest expense increased to $10.7 million for the 2006 first quarter compared to $10.2 million for the same period in 2005. The 2005 amount included $884,000 of acquisition-related charges. Excluding those items, non-interest expense increased by $1.4 million. Approximately $600,000 of the increase was in compensation and benefits, due to the second quarter 2005 acquisition of Genoa Savings and Loan, increased commissions earned by First Insurance agents resulting from revenue growth, merit and cost of living increases which on average were between 3.5% and 4.0%, and added central office staffing. Also, compensation increased $59,000 due to the expensing of stock options beginning in the 2006 first quarter.

Occupancy, Ohio franchise tax, data processing costs and intangible amortization all increased in the first quarter of 2006 compared to the same period in 2005 as a result of the

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growth over the last 12 months. Also, as a result of the Company’s expansion, advertising and promotional expenses increased from $182,000 to $304,000 between the 2005 and 2006 first quarters.

Balance Sheet Growth

Total assets at March 31, 2006 were $1.48 billion, a slight increase over the $1.46 billion reported at December 31, 2005. Net loans receivable (excluding loans available for sale) were $1.19 billion at March 31, 2006 compared to $1.17 billion at December 31, 2005. Deposits over that time period increased to $1.08 billion at March 31, 2006 from $1.07 billion at December 31, 2005. Total shareholders’ equity increased to $154.0 million at March 31, 2006 compared to $151.2 million at the end of 2005. Also at March 31, 2006, goodwill and other intangible assets totaled $39.0 million compared to $39.2 million at December 31, 2005.

Sound Strategy In Place

“With the first quarter of 2006 behind us, we are confident in our ability to execute our strategic plan,” stated Mr. Small. “Initiatives to increase core deposit accounts and to increase fee income are working; our loan growth remains very strong in a very challenging market; we’ve made progress on improving our asset quality; our efficiency ratio was improved at less than 64% for the quarter; and the integration of our recent acquisitions continues to improve each month.”

“There are real challenges ahead,” continued Mr. Small. “Our margin this quarter of 3.84% may very well be the high point for the year. Our projections in this rate environment suggest that net interest margins will drop to the 3.60% to 3.70% range by the fourth quarter of 2006. Also, mortgage banking remains a big part of our business and, while activity in the mortgage area has picked up over the last couple of months, volumes remain lower than expected and gain on sale margins continue to be squeezed in the face of strong competition.”

“Overall we are optimistic about the year,” concluded Mr. Small. “We have accomplished a great deal already, and we are prepared to address the challenges ahead.”

Conference Call

First Defiance Financial Corp. will host a conference call at 11:00 a.m. (EDT) on Tuesday, April 18, 2006 to discuss the earnings results and business trends. The conference call may be accessed by calling 888-880-1525. The passcode for the conference call is “First Defiance”. The conference identification number for the call is 6721626. Participants should be prepared to provide both the passcode and conference identification number to access the call.

Internet access to the call is also available (in listen-only mode) at the following Web address:

http://phx.corporate-ir.net/phoenix.zhtml?p=irol eventDetails&c=90296&eventID=1236980(Due to URL length, please copy and paste into browser.)

The audio replay of the Internet Web cast will be available at www.fdef.com until May 30, 2006.

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Annual Meeting of Shareholders

First Defiance Financial Corp. will host its Annual Meeting of Shareholders at 1:00 p.m. on Tuesday, April 18, 2006 at the Company’s corporate headquarters at 601 Clinton Street in Defiance. Following the meeting, the audio replay, slide presentation and transcript will be available at the Company’s Web site at www.fdef.com.

About First Defiance Financial Corp.

First Defiance Financial Corp., headquartered in Defiance, Ohio, is the holding company for First Federal Bank of the Midwest and First Insurance & Investments. First Federal operates 25 full service branches and 33 ATM locations in northwest Ohio. First Insurance & Investments is the largest property and casualty insurance agency in the Defiance, Ohio area, also specializing in life and group health insurance and financial planning.

For more information, visit the company’s Web site at www.fdef.com.

-Financial Statements and Highlights Follow-

Safe Harbor Statement

This news release may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21 B of the Securities Act of 1934, as amended, which are intended to be safe harbors created thereby. Those statements may include, but are not limited to, all statements regarding intent, beliefs, expectations, projections, forecasts and plans of First Defiance Financial Corp. and its management, and specifically include statements regarding: future movements of interest rates and particularly 10-year Treasury notes, the production levels of mortgage loan generation, the ability to continue to grow loans and deposits, the ability to benefit from a rising interest rate environment, the ability to sustain credit quality ratios at current or improved levels, the ability to sell REO properties, continued strength in the market area for First Federal Bank of the Midwest, and the ability of the Company to grow in existing and adjacent markets. These forward-looking statements involve numerous risks and uncertainties, including those inherent in general and local banking, insurance and mortgage conditions, competitive factors specific to markets in which the Company and its subsidiaries operate, future interest rate levels, legislative and regulatory decisions or capital market conditions and other risks and uncertainties detailed from time to time in the Company’s Securities and Exchange Commission (SEC) filings, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2005. One or more of these factors have affected or could in the future affect the Company’s business and financial results in future periods and could cause actual results to differ materially from plans and projections. Therefore, there can be no assurances that the forward-looking statements included in this news release will prove to be accurate. In light of the significant uncertainties in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other persons, that the objectives and plans of the Company will be achieved. All forward-looking statements made in this news release are based on information presently available to the management of the Company. The Company assumes no obligation to update any forward-looking statements.

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Consolidated Balance Sheets
First Defiance Financial Corp.
	March 31,			December 31,			March 31,
(in thousands)	2006			2005			2005
Assets
Cash and cash equivalents
Cash and amounts due from depository institutions	$	31,582		$	44,066		$	24,770
Interest-bearing deposits		6,459			5,190			997
		38,041			49,256			25,767
Securities
Available-for sale, carried at fair value		110,659			113,079			130,456
Held-to-maturity, carried at amortized cost		1,697			1,775			2,180
		112,356			114,854			132,636
Loans		1,203,212			1,178,154			1,023,814
Allowance for loan losses		(13,848	)		(13,673	)		(12,749	)
Loans, net		1,189,364			1,164,481			1,011,065
Loans held for sale		4,370			5,282			3,604
Mortgage servicing rights		5,141			5,063			4,386
Accrued interest receivable		6,262			6,207			5,790
Federal Home Loan Bank stock and other interest-bearing assets		17,792			17,544			15,397
Bank Owned Life Insurance		24,583			24,346			18,759
Office properties and equipment		32,943			32,429			28,930
Real estate and other assets held for sale		3,710			404			488
Goodwill		35,084			35,084			29,993
Core deposit and other intangibles		3,937			4,117			3,415
Other assets		4,607			2,015			3,681
Total Assets	$	1,478,190		$	1,461,082		$	1,283,911
Liabilities and Stockholders’ Equity
Non-interest-bearing deposits	$	94,515		$	103,498		$	76,644
Interest-bearing deposits		987,280			966,003			873,942
Total deposits		1,081,795			1,069,501			950,586
Advances from Federal Home Loan Bank		185,449			180,960			156,875
Notes payable and other interest-bearing liabilities		22,355			25,748			19,639
Subordinated debentures		20,619			20,619			-
Advance payments by borrowers for tax and insurance		357			605			187
Deferred taxes		629			795			116
Other liabilities		12,941			11,638			10,372
Total liabilities		1,324,145			1,309,866			1,137,775
Stockholders’ Equity
Preferred stock		-			-			-
Common stock, net		117			117			118
Additional paid-in-capital		109,149			108,628			107,751
Stock acquired by ESOP		(840	)		(1,053	)		(1,266	)
Deferred compensation		(2	)		(2	)		(3	)
Accumulated other comprehensive income (loss)		(574	)		(22	)		686
Retained earnings		113,856			112,041			107,856
Treasury stock, at cost		(67,661	)		(68,493	)		(69,006	)
Total stockholders’ equity		154,045			151,216			146,136
Total liabilities and stockholders’ equity	$	1,478,190		$	1,461,082		$	1,283,911

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Consolidated Statements of Income (Unaudited)
First Defiance Financial Corp.
	Three Months Ended
	March 31,
(in thousands, except per share amounts)	2006		2005
Interest Income:
Loans	$	20,047	$	14,763
Investment securities		1,343		1,438
Interest-bearing deposits		71		71
FHLB stock dividends		248		165
Total interest income		21,709		16,437
Interest Expense:
Deposits		6,823		3,945
FHLB advances and other		2,147		1,800
Subordinated debentures		298		-
Notes Payable		132		81
Total interest expense		9,400		5,826
Net interest income		12,309		10,611
Provision for loan losses		383		347
Net interest income after provision for loan losses		11,926		10,264
Non-interest Income:
Service fees and other charges		1,791		1,201
Mortgage banking income		734		862
Gain on sale of securities		-		621
Insurance and investment sales commissions		1,660		1,213
Trust income		79		78
Income from Bank Owned Life Insurance		237		177
Other non-interest income		15		110
Total Non-interest Income		4,516		4,262
Non-interest Expense:
Compensation and benefits		6,106		5,512
Occupancy		1,219		1,029
SAIF deposit insurance premiums		35		31
State franchise tax		327		284
Acquisition related charges		-		884
Data processing		914		813
Amortization of intangibles		179		114
Other non-interest expense		1,962		1,579
Total Non-interest Expense		10,742		10,246
Income before income taxes		5,700		4,280
Income taxes		1,848		1,409
Net income	$	3,852	$	2,871
Earnings per share:
Basic	$	0.55	$	0.43
Diluted	$	0.54	$	0.41
Core operating earnings per share*:
Basic	$	0.55	$	0.52
Diluted	$	0.54	$	0.50
Average Shares Outstanding:
Basic		7,005		6,656
Diluted		7,182		6,929
* - See Non-GAAP Disclosure Reconciliations

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Financial Summary and Comparison
First Defiance Financial Corp.
	Three months ended or at
	March 31,
(dollars in thousands, except per share data)	2006			2005			% change
Summary of Operations
Tax-equivalent interest income (1)		21,853			16,607			31.6
Interest expense		9,400			5,826			61.3
Tax-equivalent net interest income (1)		12,453			10,781			15.5
Provision for loan losses		383			347			10.4
Tax-equivalent NII after provision for loan loss (1)		12,070			10,434			15.7
Securities gains		-			621			(100.0	)
Non-interest income-excluding securities gains		4,516			3,641			24.0
Non-interest expense		10,742			10,246			4.8
Non-interest expense-excluding non-core charges		10,742			9,362			14.7
One time acquisition related charges		-			884			NM
Income taxes		1,848			1,409			31.2
Net Income		3,852			2,871			34.2
Core operating earnings (2)		3,852			3,446			11.8
Tax equivalent adjustment (1)		144			170			(15.3	)
At Period End
Assets		1,478,190			1,283,911			15.1
Earning assets		1,339,819			1,172,844			14.2
Loans		1,207,582			1,027,418			17.5
Allowance for loan losses		13,848			12,749			8.6
Deposits		1,081,795			950,586			13.8
Stockholders’ equity		154,045			146,136			5.4
Average Balances
Assets		1,459,158			1,235,682			18.1
Earning assets		1,316,096			1,143,549			15.1
Deposits and interest-bearing liabilities		1,292,046			1,096,645			17.8
Loans		1,177,707			982,125			19.9
Deposits		1,065,677			921,196			15.7
Stockholders’ equity		152,602			134,005			13.9
Stockholders’ equity / assets		10.46	%		10.84	%		(3.6	)
Per Common Share Data
Net Income
Basic	$	0.55		$	0.43			27.9
Diluted		0.54			0.41			31.7
Core operating earnings (2)
Basic	$	0.55		$	0.52			6.2
Diluted	$	0.54		$	0.50			7.8
Dividends		0.24			0.22			9.1
Market Value:
High	$	28.88		$	29.90			(3.4	)
Low		25.39			26.00			(2.3	)
Close		26.34			26.00			1.3
Book Value		21.51			20.82			3.3
Tangible Book Value		16.61			16.06			3.4
Shares outstanding, end of period (000)		7,165			7,020			2.1
Performance Ratios (annualized)
Tax-equivalent net interest margin (1)		3.84	%		3.83	%		0.1
Return on average assets --GAAP		1.07	%		0.94	%		13.6
Return on average assets -- Core Operating		1.07	%		1.13	%		(5.3	)
Return on average equity -- GAAP		10.24	%		8.69	%		17.8
Return on average equity -- Core Operating		10.24	%		10.43	%		(1.8	)
Efficiency ratio (3) -- GAAP		63.30	%		71.04	%		(10.9	)
Efficiency ratio (3) -- Core Operating		63.30	%		64.91	%		(2.5	)
Effective tax rate		32.42	%		32.92	%		(1.5	)
Dividend payout ratio (basic)		43.64	%		51.16	%		(14.7	)

(1) Interest income on tax-exempt securities and loans has been adjusted to a tax-equivalent basis using the statutory federal income tax rate of 35%

(2) Core operating earnings = Net income plus after-tax effect of acquisition related and other one-time charges. See Non-GAAP Disclosure Reconciliation

(3) Efficiency ratio = Non-interest expense divided by sum of tax-equivalent net interest income plus non-interest income, excluding securities

gains, net and asset sales gains, net.

NM Percentage change not meaningful

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Non-GAAP Disclosure Reconciliations

First Defiance Financial Corp.

Core operating earnings are net income adjusted to exclude discontinued operations, merger, integration and restructuring expenses and the results of certain significant transactions not representative of ongoing operations.

	Three months ended
	March 31,
(dollars in thousands, except per share data)	2006		2005
Core Operating Earnings
Net Income	$	3,852	$	2,871
One-time acquisition related charges		-		884
Tax effect		-		(309	)
After-tax non-operating items		-		575
Core operating earnings	$	3,852	$	3,446
One-time acquisition related charges in 2005 reflect charges associated with the acquisition of ComBanc, Inc. and Genoa Savings and Loan Company.

Core Operating earnings is used as the numerator to calculate core operating return on average assets, core operating return on average equity and core operating earnings per share. Additionally, non-operating items are deducted from non-interest expense in the numerator and non-interest income in the denominator of the core operating efficiency ratio disclosed in the tables. Comparable information on a GAAP basis is also provided in the tables.

Income from Mortgage Banking
Revenue from sales and servicing of mortgage loans consisted of the following:
	Three months ended
	March 31,
(dollars in thousands)	2006			2005
Gain from sale of mortgage loans	$	488		$	497
Mortgage loan servicing revenue (expense):
Mortgage loan servicing revenue		374			310
Amortization of mortgage servicing rights		(139	)		(166	)
Mortgage servicing rights valuation adjustments		11			221
		246			365
Total revenue from sale and servicing of mortgage loans	$	734		$	862

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Yield Analysis
First Defiance Financial Corp.
	Three Months Ended March 31,
	2006							2005
	Average				Yield			Average				Yield
	Balance		Interest(1)		Rate(2)			Balance		Interest(1)		Rate(2)
Interest-earning assets:
Loans receivable	$	1,177,707	$	20,053		6.91	%	$	982,125	$	14,767		6.10	%
Securities		114,123		1,481		5.26	%		136,650		1,604		4.85	%
Interest Bearing Deposits		6,720		71		4.28	%		9,942		71		2.90	%
FHLB stock		17,546		248		5.73	%		14,832		165		4.51	%
Total interest-earning assets		1,316,096		21,853		6.73	%		1,143,549		16,607		5.90	%
Non-interest-earning assets		143,062							92,133
Total assets	$	1,459,158						$	1,235,682
Deposits and Interest-bearing liabilities:
Interest bearing deposits	$	973,650	$	6,823		2.84	%	$	846,829	$	3,945		1.89	%
FHLB advances and other		185,942		2,147		4.68	%		160,814		1,800		4.54	%
Other Borrowings		19,808		132		2.70	%		14,635		81		2.24	%
Subordinated debentures		20,619		298		5.86	%		-		-		0.00	%
Total interest-bearing liabilities		1,200,019		9,400		3.18	%		1,022,278		5,826		2.31	%
Non-interest bearing deposits		92,027		-		-			74,367		-		-
Total including non-interest-bearing demand deposits		1,292,046		9,400		2.95	%		1,096,645		5,826		2.15	%
Other non-interest-bearing liabilities		14,510							5,032
Total liabilities		1,306,556							1,101,677
Stockholders' equity		152,602							134,005
Total liabilities and stockholders' equity	$	1,459,158						$	1,235,682
Net interest income; interest rate spread			$	12,453		3.55	%			$	10,781		3.59	%
Net interest margin (3)						3.84	%						3.83	%
Average interest-earning assets to average interest bearing liabilities						110	%						112	%

(1) Interest on certain tax exempt loans and securities is not taxable for Federal income tax purposes. In order to compare the tax-exempt yields on these assets to

  taxable yields, the interest earned on these assets is adjusted to a pre-tax equivalent amount based on the marginal corporate federal income tax rate of 35%.

(2) Annualized

(3) Net interest margin is net interest income divided by average interest-earning assets.

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Selected Quarterly Information
First Defiance Financial Corp.
(dollars in thousands, except per share data)	1st Qtr 2006			4th Qtr 2005			3rd Qtr 2005			2nd Qtr 2005			1st Qtr 2005
Summary of Operations
Tax-equivalent interest income (1)	$	21,853		$	21,283		$	20,079		$	18,830		$	16,607
Interest expense		9,400			8,535			7,715			6,816			5,826
Tax-equivalent net interest income (1)		12,453			12,748			12,364			12,014			10,781
Provision for loan losses		383			378			368			349			347
Tax-equivalent NII after provision for loan losses (1)		12,070			12,370			11,996			11,665			10,434
Investment securities gains		-			-			86			515			621
Non-interest income (excluding securities gains/losses)		4,516			3,768			3,930			3,365			3,641
Non-interest expense		10,742			10,684			10,496			12,518			10,246
Acquisition and other non-core charges		-			20			97			2,476			884
Income taxes		1,848			1,864			1,742			838			1,409
Net income		3,852			3,444			3,627			2,028			2,871
Core operating earnings (2)		3,852			3,457			3,690			3,553			3,446
Tax equivalent adjustment (1)		144			146			147			161			170
At Period End
Total assets	$	1,478,190		$	1,461,082		$	1,417,577		$	1,399,626		$	1,283,911
Earning assets		1,344,189			1,321,024			1,276,425			1,264,326			1,163,699
Loans, including loans held for sale		1,207,582			1,183,436			1,153,566			1,140,885			1,027,418
Allowance for loan losses		13,848			13,673			13,624			13,460			12,749
Deposits		1,081,795			1,069,501			1,071,057			1,046,481			950,586
Stockholders’ equity		154,045			151,216			149,284			147,550			146,136
Stockholders’ equity / assets		10.42	%		10.35	%		10.53	%		10.54	%		11.38	%
Goodwill		35,084			35,084			35,345			35,356			29,993
Average Balances (3)
Total assets	$	1,459,158		$	1,429,953		$	1,411,434		$	1,382,129		$	1,235,682
Earning assets		1,316,096			1,290,007			1,275,117			1,246,479			1,143,549
Deposits and interest-bearing liabilities		1,292,046			1,265,623			1,250,513			1,224,350			1,096,645
Loans		1,177,707			1,149,937			1,136,526			1,091,178			982,125
Deposits		1,065,677			1,058,660			1,046,287			1,048,961			921,196
Stockholders’ equity		152,602			150,063			149,332			147,200			134,005
Stockholders’ equity / assets		10.46	%		10.49	%		10.58	%		10.65	%		10.84	%
Per Common Share Data
Net Income:
Basic	$	0.55		$	0.49		$	0.52		$	0.29		$	0.43
Diluted		0.54			0.48			0.50			0.28			0.41
Core operating earnings (2)
Basic	$	0.55		$	0.49		$	0.53		$	0.53		$	0.52
Diluted		0.54			0.48			0.51			0.51			0.50
Dividends		0.24			0.24			0.22			0.22			0.22
Market Value:
High	$	28.88		$	30.06		$	31.44		$	30.46		$	29.90
Low		25.39			25.56			26.21			25.29			26.00
Close		26.34			27.09			27.43			26.69			26.00
Book Value		21.51			21.31			21.14			20.91			21.11
Shares outstanding, end of period (in thousands)		7,165			7,085			7,060			7,056			7,020
Performance Ratios (annualized)
Tax-equivalent net interest margin (1)		3.84	%		3.92	%		3.85	%		3.87	%		3.83	%
Return on average assets -- GAAP (4)		1.07	%		0.96	%		1.03	%		0.59	%		0.94	%
Return on average assets -- Core operating		1.07	%		0.97	%		1.05	%		1.03	%		1.13	%
Return on average equity -- GAAP		10.24	%		9.18	%		9.72	%		5.51	%		8.69	%
Return on average equity -- Core operating		10.24	%		9.21	%		9.88	%		9.65	%		10.43	%
Efficiency ratio (5) -- GAAP		63.30	%		64.69	%		64.42	%		81.78	%		71.04	%
Efficiency ratio -- Core operating		63.30	%		64.57	%		63.82	%		66.02	%		64.91	%
Effective tax rate		32.42	%		35.12	%		32.45	%		29.24	%		32.92	%
Dividend payout ratio (basic)		43.64	%		48.98	%		42.31	%		75.86	%		51.16	%

(1) Interest income on tax-exempt securities and loans has been adjusted to a tax-equivalent basis using the statutory federal income tax rate of 35%

(2) See Non-GAAP Disclosure Reconciliation

(3) Average balances do not reflect borrowings to fund discontinued operations

(4) Income from continuing operations divided by assets, excluding assets of discontinued operations

(5) Efficiency ratio = Non-interest expense divided by sum of tax-equivalent net interest income plus non-interest income, excluding securities gains, net and asset sales gains, net.

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Selected Quarterly Information
First Defiance Financial Corp.
(dollars in thousands, except per share data)	1st Qtr 2006			4th Qtr 2005			3rd Qtr 2005			2nd Qtr 2005			1st Qtr 2005
Loan Portfolio Composition
One to four family residential real estate	$	268,380		$	275,497		$	272,283		$	283,812		$	226,283
Construction		18,462			21,173			22,434			24,000			14,861
Commercial real estate		544,342			551,983			524,305			496,599			482,326
Commercial		215,279			171,289			167,990			172,351			160,749
Consumer finance		52,530			55,297			57,018			57,223			51,753
Home equity and improvement		112,927			113,000			111,234			111,291			95,200
Total loans		1,211,920			1,188,239			1,155,264			1,145,276			1,031,172
Less:
Loans in process		7,443			8,782			8,601			10,372			6,170
Deferred loan origination fees		1,265			1,303			1,250			1,243			1,188
Allowance for loan loss		13,848			13,673			13,624			13,460			12,749
Net Loans	$	1,189,364		$	1,164,481		$	1,131,789		$	1,120,201		$	1,011,065
Allowance for loan loss activity
Beginning allowance	$	13,673		$	13,624		$	13,460		$	12,749		$	9,956
Provision for loan losses		383			378			368			349			347
Reserve from acquisitions								-			865			2,538
Reclassification between allowance for loan loss and
purchase loan discount on prior quarter acquisition											(376	)
Credit loss charge-offs:
One to four family residential real estate		188			150			32			-			-
Commercial real estate		57			25			134			-			67
Commercial		17			55			65			104			43
Consumer finance		95			121			74			100			59
Home equity and improvement		32			25			-			-			-
Total charge-offs		389			376			305			204			169
Total recoveries		181			47			101			77			77
Net charge-offs (recoveries)		208			329			204			127			92
Ending allowance	$	13,848		$	13,673		$	13,624		$	13,460		$	12,749
Credit Quality
Non-accrual loans	$	3,856		$	4,952		$	6,720		$	4,745		$	3,142
Loans over 90 days past due and still accruing		-			-			-			-			-
Total non-performing loans (1)		3,856			4,952			6,720			4,745			3,142
Real estate owned (REO)		3,710			404			168			431			488
Total non-performing assets (1)	$	7,566		$	5,356		$	6,888		$	5,176		$	3,630
Net charge-offs		208			329			204			127			94
Allowance for loan losses / loans		1.15	%		1.16	%		1.18	%		1.18	%		1.24	%
Allowance for loan losses / non-performing assets		183.03	%		255.28	%		197.79	%		260.05	%		351.21	%
Allowance for loan losses / non-performing loans		359.13	%		276.11	%		202.74	%		283.67	%		405.76	%
Non-performing assets / loans plus REO		0.63	%		0.45	%		0.60	%		0.45	%		0.35	%
Non-performing assets / total assets		0.51	%		0.37	%		0.49	%		0.37	%		0.28	%
Net charge-offs / average loans (annualized)		0.07	%		0.11	%		0.07	%		0.05	%		0.04	%
Deposit Balances
Non-interest-bearing demand deposits	$	94,515		$	103,498		$	92,720		$	87,172		$	76,644
Interest-bearing demand deposits and money market		295,873			276,558			262,544			271,118			270,142
Savings deposits		80,826			82,766			88,994			94,391			85,581
Retail time deposits less than $100,000		437,609			408,384			424,607			412,797			356,763
Retail time deposits greater than $100,000		135,655			161,305			139,752			137,558			125,551
National/Brokered time deposits		37,317			36,990			62,440			43,445			35,905
Total deposits	$	1,081,795		$	1,069,501		$	1,071,057		$	1,046,481		$	950,586

(1) Non-performing loans consist of non-accrual loans that are contractually past due 90 days or more and loans that are deemed impaired under the criteria of FASB Statement No. 114. Non-performing assets are non-performing loans plus real estate and other assets acquired by foreclosure or deed-in-lieu thereof.

12